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Home Builder Sentiment Takes Big Jump In April

Home builder sentiment -- as measured by the National Association of Home Builders -- took its biggest leap up in five years in April.

This falls into the "not so bad is the new good" category.

The NAHB's home builders sentiment scale runs from one to 100, with one representing the most pessimism about the housing market and 100 the most optimism. The index surveys 360 developers across the country.

In April, the index number was 14, up from its near-historically low level of nine in March. It now stands at its highest level since October.

Here's the thing, though: Any number below 50 means that home builders are still pessimistic about the market.

So what does the spike in home builder sentiment mean?

The index is broken down into three categories: current sales conditions, buyer traffic and expectations for sales over the next six months.

All three numbers increased in April, but the biggest jump came in the category of expected sales over the next six months, which rose from 15 to 25. Which suggests prospective buyers are back out there, walking through open houses on weekends and maybe even kicking the tires.

There still exists one huge problem, though: Excess inventory. Home builders rode the top of the housing bubble and overbuilt many areas of the country, such as Nevada, California and Arizona.

Until or unless all that excess inventory gets bulldozed -- or the recovery takes a significant uptick -- there will still be an overhang of supply and not enough demand.